Correlation Between Carnegie Clean and X-FAB Silicon

Can any of the company-specific risk be diversified away by investing in both Carnegie Clean and X-FAB Silicon at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Carnegie Clean and X-FAB Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carnegie Clean Energy and X FAB Silicon Foundries, you can compare the effects of market volatilities on Carnegie Clean and X-FAB Silicon and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Carnegie Clean with a short position of X-FAB Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnegie Clean and X-FAB Silicon.

Diversification Opportunities for Carnegie Clean and X-FAB Silicon

-0.28

Correlation Coefficient

Carnegie Clean  X-FAB Silicon

Very good diversification

The 3 months correlation between Carnegie and X-FAB is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon and Carnegie Clean is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Carnegie Clean Energy are associated (or correlated) with X-FAB Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Carnegie Clean i.e., Carnegie Clean and X-FAB Silicon go up and down completely randomly.

Pair Corralation between Carnegie Clean and X-FAB Silicon

Assuming the 90 days trading horizon Carnegie Clean Energy is expected to generate 1.08 times more return on investment than X-FAB Silicon. However, Carnegie Clean is 1.08 times more volatile than X FAB Silicon Foundries. It trades about 0.0 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.01 per unit of risk. If you would invest  2.10  in Carnegie Clean Energy on October 9, 2024 and sell it today you would lose (0.06) from holding Carnegie Clean Energy or give up 2.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Carnegie Clean Energy  vs.  X FAB Silicon Foundries

Carnegie Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnegie Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Carnegie Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, X-FAB Silicon is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Carnegie Clean and X-FAB Silicon

The main advantage of trading using opposite Carnegie Clean and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnegie Clean position performs unexpectedly, X-FAB Silicon can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in X-FAB Silicon will offset losses from the drop in X-FAB Silicon's long position.

The idea behind Carnegie Clean Energy and X FAB Silicon Foundries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.